How A Credit Card System Operates?

Only a rare few can go without a credit card these days, and Filipino people won’t be an exception. Yet, many use one without fully understanding how a credit card system works. So let’s start with the basics:

What does a Credit Card mean?

Credit cards are described as “plastic money”, coming in the form of a plastic 86 x 54 mm card, which allows cardholders to make cashless transactions. Credit card holders are allocated a “credit limit” by the bank, which is the maximum amount the bank agrees to lend you for these transactions.

When applying for a card, we are often able to choose between different companies – American Express, MasterCard or Visa. But what are the roles of these companies? Why do banks need them?

What happens after I pay the bills using my Credit Card?

Here are the parties involved in every credit card transaction, each vital to a smooth payment process. This will give you a sense of who’s who:

To simplify matters, let’s say you enter a shop to make a purchase with your credit card. The cashier swipes it through a credit card reader/terminal.